To provide readers with a clear and structured understanding of the evolution of salary‑related tax provisions in India, the following table presents a comprehensive comparison between the allowances available under the Income‑tax Act, 1961 and their corresponding treatment under the Income Tax Act, 2025. This comparison highlights the continuity, modifications, enhancements, and deletions introduced in the new legislative framework, enabling taxpayers, practitioners, and researchers to appreciate how the updated Act aligns with contemporary economic and administrative requirements.
A. Common Salary Allowances
S. No. |
IT Act 1961 |
IT Rules 1962 |
IT Act and Schedule 2025 |
IT Rules 2026 |
Description |
IT Act 1961 Provisions |
IT Act 2025 Provisions |
Change |
Section |
Rule |
Section |
Rule |
|||||
1. |
10(13A) |
2A |
Section 11 read with schedule III (11) |
279 |
House Rent Allowances (HRA) |
Lowest of the following shall be exempt:– Actual HRA Received– 40% of Basic Salary+DA (50% if house situated in Mumbai, Delhi, Chennai or Kolkata)– Rent – 10% of Basic Salary+DA |
Lowest of the following shall be exempt:– Actual HRA Received– 40% of Basic Salary+DA (50% if house situated in Mumbai, Delhi, Chennai, Kolkata, Hyderabad, Bangalore, Pune or Ahmedabad– Rent – 10% of Basic Salary+DA |
4 new cities Hyderabad, Bangalore, Pune and Ahmedabad added in 50% of Basic Salary limit |
2. |
10(14)(ii) |
2BB |
Section 11 read with schedule III (13) |
280 |
Children Education Allowance |
Exemption up to Rs. 100 per month per child (Max. 2 children) |
Exemption up to Rs. 3000 per month per child (Max. 2 children) |
Change in exemption limit |
3. |
10(14)(ii) |
2BB |
Section 11 read with schedule III (13) |
280 |
Hostel Expenditure Allowance |
Exemption up to Rs. 300 per month per child (Max. 2 children) |
Exemption up to Rs. 9000 per month per child (Max. 2 children) |
Change in exemption limit |
4. |
10(14)(ii) |
2BB |
Section 11 read with schedule III (13) |
280 |
Transport Allowance to employee who is blind or deaf and dumb or orthopedically handicapped with disability of lower extremities |
Exemption INR 3200 per month |
Exemption: Metro cities 15000+DA per month and other cities 8000+DA per month |
Change in exemption limit and locations |
5. |
10(14) |
2BB |
Section 11 read with schedule III (13) |
280 |
Any Allowance to an employee working in any transport business to meet his personal expenditure during his duty performed |
Exemption 70% of allowances received upto maximum INR 10000 per month |
Exemption 70% of allowances received upto maximum INR 25000 per month |
Change in exemption limit |
6. |
10(14)(i) |
2BB |
Section 11 read with schedule III (12) |
280 |
Conveyance Allowance |
Exempt to extent of actual expenses incurred |
Exempt to extent of actual expenses incurred |
No Change |
7. |
10(14)(i) |
2BB |
Section 11 read with schedule III (12) |
280 |
Tour or Travel Allowance |
Exempt to extent of actual expenses incurred |
Exempt to extent of actual expenses incurred |
No Change |
8. |
10(14)(i) |
2BB |
Section 11 read with schedule III (12) |
280 |
Daily Allowance |
Exempt to extent of actual expenses incurred |
Exempt to extent of actual expenses incurred |
No Change |
9. |
10(14)(i) |
2BB |
Section 11 read with schedule III (12) |
280 |
Helper/Assistant Allowance |
Exempt to extent of actual expenses incurred |
Exempt to extent of actual expenses incurred |
No Change |
10. |
10(14)(i) |
2BB |
Section 11 read with schedule III (12) |
280 |
Research Allowance |
Exempt to extent of actual expenses incurred |
Exempt to extent of actual expenses incurred |
No Change |
11. |
10(14)(i) |
2BB |
Section 11 read with schedule III (12) |
280 |
Uniform Allowance |
Exempt to extent of actual expenses incurred |
Exempt to extent of actual expenses incurred |
No Change |
12. |
NA |
NA |
Section 11 read with schedule III (12) |
280 |
Any payment in connection with packing and transportation of personal effects in case of transfer |
Not Available in Old Income Tax Act 1961 |
Exempt to extent of actual expenses incurred |
New exemption added |
B. Special & Compensatory Allowances
S. No. |
IT Act 1961 |
IT Rules 1962 |
IT Act and Schedule 2025 |
IT Rules 2026 |
Description |
IT Act 1961 Provisions |
IT Act 2025 Provisions |
Change |
Section |
Rule |
Section |
Rule |
|||||
13. |
10(7) |
NA |
Section 11 read with schedule III (9) |
NA |
Any allowances or perquisites paid or allowed to Govt. employees for rendering services outside India |
Fully Exempt |
Fully Exempt |
No Change |
14. |
HC/SC JudgesAct |
HC/SC Judges Act |
Allowances to Judges of High Court/Supreme Court |
Fully Exempt |
Fully Exempt |
No Change |
||
15. |
Exempt under Treaty |
Exempt under Treaty |
Allowances paid by the UNO to its employees |
Fully Exempt |
Fully Exempt |
No Change |
||
16. |
10(14)(ii) |
2BB |
Section 11 read with schedule III (13) |
280 |
Special compensatory Allowance (Hilly Areas) (Subject to certain conditions and locations) |
Amount exempt from tax varies from Rs. 300 per month to Rs. 7,000 per month. |
Amount exempt from tax varies from Rs. 1500 per month to Rs. 7,000 per month. |
Change in exemption limit and locations |
17. |
10(14)(ii) |
2BB |
NA |
NA |
Border area allowances, Remote Locality allowance or Disturbed Area allowance or Difficult Area Allowance |
Amount exempt from tax varies from Rs. 200 per month to Rs. 1300 per month. |
Deleted |
Deleted in New IT Act 2025 |
18. |
10(14)(ii) |
2BB |
NA |
NA |
Tribal area allowance given in (a) Madhya Pradesh (b) Tamil Nadu (c) Uttar Pradesh (d) Karnataka (e) Tripura (f) Assam (g) West Bengal (h) Bihar (i) Odisha |
Exemption INR 200 per month |
Deleted |
Deleted in New IT Act 2025 |
19. |
10(14)(ii) |
2BB |
Section 11 read with schedule III (13) |
280 |
Compensatory Field Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations) |
Exemption INR 2600 per month |
Exemption INR 13500 per month |
Change in exemption limit and locations |
20. |
10(14)(ii) |
2BB |
Section 11 read with schedule III (13) |
280 |
Compensatory Modified field Area Allowance. If this exemption is taken, employee cannot claim any exemption in respect of border area allowance (Subject to certain conditions and locations) |
Exemption INR 1000 per month |
Exemption INR 8000 per month |
Change in exemption limit and locations |
21. |
10(14)(ii) |
2BB |
Section 11 read with schedule III (13) |
280 |
Counter Insurgency Allowance granted to members of Armed Forces operating in areas away from their permanent locations. |
Exemption INR 3900 per month |
Exemption INR 22000 per month |
Change in exemption limit |
22. |
10(14)(ii) |
2BB |
Section 11 read with schedule III (13) |
280 |
Underground Allowance is granted to employees working in uncongenial, unnatural climate in underground mines |
Exemption INR 800 per month |
Exemption 15% of Basic Pay |
Change in exemption limit |
23. |
10(14)(ii) |
2BB |
Section 11 read with schedule III (13) |
280 |
High Altitude Allowance is granted to armed forces operating in high altitude areas |
Exemption of INR 1060/INR 1600 per month, depends on altitude height |
Exemption of INR 4500/INR 7000/ INR 30000 per month, depends on location and altitude height |
Change in exemption limit and location condition added |
24. |
10(14)(ii) |
2BB |
Section 11 read with schedule III (13) |
280 |
Highly active field area allowance granted to members of armed forces |
Exemption INR 4200 per month |
Exemption INR 22000 per month |
Change in exemption limit |
25. |
10(14)(ii) |
2BB |
Section 11 read with schedule III (13) |
280 |
Island Duty Allowance granted to members of armed forces in Andaman and Nicobar and Lakshadweep group of Island (Subject to certain conditions and locations) |
Exemption INR 3250 per month |
Exemption 10% to 20% of Basic Pay, depends on location |
Change in exemption limit |
26. |
NA |
NA |
Section 11 read with schedule III (13) |
280 |
Siachen Allowance granted to the members of the armed forces |
NA |
Exemption INR 42500 per month |
New exemption added |
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Well written, summarised and insightful article…..